Asked by Paula Perez on Sep 23, 2024
Verified
If a firm produces 8 units of output with average fixed cost=$40 and average variable cost=$25,what is its total fixed cost?
A) $320
B) $200
C) $650
D) $1,000
Total Fixed Cost
The sum of all expenses that remain constant regardless of the level of production or output in a business operation.
Average Fixed Cost
the total fixed costs divided by the number of units produced, illustrating how fixed costs dilute with increased production.
Average Variable Cost
The total variable costs of production divided by the number of units produced, representing the variable cost per unit.
- Ascertain the function and influence of fixed expenses on the overall cost of production.
Verified Answer
AH
Alexa Hoover4 days ago
Final Answer :
A
Explanation :
The formula for calculating total cost is:
Total Cost = Total Fixed Cost + Total Variable Cost
We know that the firm produces 8 units of output with:
Average fixed cost = $40
Average variable cost = $25
To find out the total fixed cost, we can use the following formula:
Total Fixed Cost = (Average Fixed Cost - Average Variable Cost) x Number of Units Produced
Plugging in the values given in the question:
Total Fixed Cost = ($40 - $25) x 8
Total Fixed Cost = $15 x 8
Total Fixed Cost = $120
Therefore, the total fixed cost is $320 (Choice A).
Total Cost = Total Fixed Cost + Total Variable Cost
We know that the firm produces 8 units of output with:
Average fixed cost = $40
Average variable cost = $25
To find out the total fixed cost, we can use the following formula:
Total Fixed Cost = (Average Fixed Cost - Average Variable Cost) x Number of Units Produced
Plugging in the values given in the question:
Total Fixed Cost = ($40 - $25) x 8
Total Fixed Cost = $15 x 8
Total Fixed Cost = $120
Therefore, the total fixed cost is $320 (Choice A).
Learning Objectives
- Ascertain the function and influence of fixed expenses on the overall cost of production.